06 Dec Career Spotlight – Cattle Order Buyer
On an unseasonably warm November morning in South Texas, Robert Smith stands on the catwalk above the cattle pens at Union Livestock Commission in Hondo. He will repeat this act in three more towns during the week, scouting cattle prior to auction time to prepare for a fast-paced environment of bidding. Smith is an order buyer, travelling across the area to purchase livestock for other cattlemen.
Seth Crain runs Union Livestock Commission with his father, Glen “Butter” Crain, and serves as its auctioneer. As he flips the switch to turn his mic hot and announces the sale is beginning, people begin to shuffle to their seats. A gate opens and the first cow bounds into the ring, kicking flakes of sand into the first row of chairs. Crain begins rolling off numbers, testing the waters. Some local ranchers continue to visit by the door, and a couple of children seem, at least for a moment, entranced by the pageantry of the sale.
Then there is a group of men who are clearly focused on the cattle; they appear confident and relaxed, the kind of countenance honed by years of performing a job and learning its many facets. These are the order buyers, Robert Smith among them, and they will buy most of the cattle that run across the scale today. With a slight flick of the wrist they motion with long, white bid cards, a movement almost indiscernible to the untrained eye. Crain sees them, though, and he never misses a beat. This group of buyers have been coming to his sale for years, and he has a good idea of who will bid, and when. For example, one of the buyers may rarely purchase packer cows, so Crain focuses his attention on the buyers he knows will be interested. There is no prodding, pleading, or confusion, just lightning fast deals being made a head at a time.
Order buyers serve a unique role in the beef industry. Unlike other agricultural commodities like grain, which is graded on a straightforward set of criteria and therefore largely homogenous, each head of cattle is a unique creature. Weight, body condition, frame size, color, sex, structural soundness, and breed all factor into the value of the animal, and it takes practice and tremendous dedication to become proficient in judging cattle on the hoof—often in a matter of seconds—while competing against other buyers for supply. That is why cattle raisers are willing to pay a commission (usually between $0.50 and $1.00 per hundredweight) to buyers like Smith, relying on his expertise to procure stock at the best price possible.
Beef cattle are typically sold in two ways: at auction or in private treaty deals. Country cattle, usually bunched into groups, are bought directly from a producer and are either delivered or picked up based on prearranged terms between the buyer and seller. Unlike an auction, these transactions often provide buyers more direct access to the cattle and impose less of a time constraint. Supply, however, is limited to the animals present at each ranch, and it can be difficult to discern market fluctuations without the price discovery mechanism of having other buyers present. Auctions, whether seedstock sales held at a ranch or weekly sales held at a local auction barn, are fast, loud, and electric. The rhythmic chant of the auctioneer—known to some as the “cattle rattle”—can be disconcerting to the layperson, but professional cattle buyers follow along in time and make split-second decisions about whether to bid. Perhaps the auctioneer starts the bidding on an animal too low based on his assessment of its worth, presenting an opportunity for a shrewd buyer. The next steer may have an almost imperceptible limp, a devaluation. Maybe a buyer has an order from a customer for ten bred cows and he knows there are only twenty head remaining in the sale. Clearly, the combination of factors in each bid can be staggering, not to mention that other buyers under the same pressure are seated around the room vying for the same cattle.
Staying “in the money”, or ensuring that purchased cattle can be fed and later sold at a profit, is more difficult than it sounds. Most phases of the beef cattle supply chain are prone to razor-thin margins, and seemingly minute errors add up quickly by the pound. Order buyers must accurately calculate animals’ value in the moment, but they must also predict future performance, such as how effectively they will gain weight and marbling in a feedlot environment. According to Smith, being able to piece together an animal’s condition with the current market is what makes a good order buyer. “You’ve got to know stock, know what I mean? You’ve got to know cattle,” he says.
Buying cattle also has concrete barriers to entry, real costs that can be prohibitive to creating a competitive business. Independent buyers often have facilities where they can aggregate loads of cattle. Value can be added by preconditioning and/or vaccinating, but high land costs make buying or building a facility capable of handling so many animals a daunting task. There are, however, opportunities for young professionals to enter the business by working for a larger buying group or directly for a feeder or packer.
Smith started out purchasing cattle for himself and has been buying for customers for over twenty-five years. In that time, he has seen the area cattle market undergo extensive changes. Before the Crains and their partner Howard Billings bought Union Livestock Commission and moved to Hondo, the sales were held at the Union Stock Yards in San Antonio. In the heyday of its 112-year run, the yard—with its four commission companies—saw close to a million head of cattle, sheep, goats, and hogs come through the facility in a year. Changes in land use, the advent of video marketing, and a shrinking ranching industry have fragmented the market. Cattle that would once sell in San Antonio now travel to small towns like Hondo, Pearsall, and Uvalde. Lighter runs, says Smith, make it more difficult to fill orders. Buyers are competing against each other for fewer cattle, so there is no room to nod off during a sale.
Even when dealing in the country cattle market, buyers must be on their toes. Jennings Steen and his partner Leslie Callahan formed Crossroads Cattle Company, based in Austin, in 2002. Steen and his team source cattle across a large area of the United States, and though he recognizes the important role auction barns play in the market, most of their work centers on buying calves in the country. He believes this model works well for several reasons, including a reduced amount of stress placed on the cattle. “One less step is one less step of stress,” he says. Additionally, Texas auctions rarely offer cattle in load lots, which makes it difficult for larger buyers like Crossroads to assemble truckload quantities in an efficient manner. Good country buyers, says Steen, must be able to communicate to producers the different calculations wrapped up in a private treaty deal, such as transportation costs, basis, and forward contracting. These factors aren’t so important for a producer to understand in the spot market of an auction, but they also provide opportunities to enhance profitability. “You spent a full year, all of this time [raising a calf crop], and if that was mine I’d want to do my research and market the best possible way I can,” says Steen. One thing on which he definitely agrees: effective cattle buyers, whether in the seat or boots on the ground at a ranch, have a background in the industry and the kind of disposition conducive to making honest but profitable deals with ranchers every day.
While buying cattle in the country works well for some, the behemoth in the cattle selling world, video marketing company Superior Livestock, relies heavily on the price discovery of live auctions. Cattle are filmed at ranches, grouped into lots, and offered via video at auctions held at the company’s headquarters in Fort Worth and various other locations across the country. Superior vice president Joe Lichtie says the company has offered over 37 million head since 1987. They market cattle through a bidding process on their website’s country page, and their roughly 400 field representatives do some private treaty deals; however, the vast majority of cattle sold each year move through video auctions. “We’ve offered 1.2 million this year, and [only] 70,000 of that 1.2 million would be on the country page,” he says. Lichtie points out that this volume and consistency is beneficial to professional buyers, saying “If they know the reputation of the cattle and the breeder and the rep, it’s not hard to fill an order.” Superior has also introduced value added programs, such as vaccination certifications, that have been shown to improve producers’ bottom lines.
With these myriad innovations in how stockmen buy and sell cattle, order buyers are more integral to the process than ever, and that is just fine with Smith. He recounts his childhood, how his younger relatives would run and play at the sale barn while he was paying close attention. After working a slew of different jobs, from shoeing horses to welding, he found his true calling. He has built a successful business on the principle of honesty, and when asked if he will be able to continue this work until he retires, he looks up smiling from under his hat brim and nods.
In the café attached to the sale barn, Smith orders up a plate of food and reclines in his chair, satisfied that he did a good job today. He pulls a pen and a bid card from his pocket and begins scribbling figures, explaining the importance of what he does for a living and why he loves it so much. After lunch, he’ll check his load for accuracy and prepare for the next sale . . . and the one after that.